=MARKET BUZZ: CK Group Likely Foresaw Antitrust Hurdle In APA Deal - Daiwa
HONG KONG (Jun 13) -- CK Infrastructure up less than 0.1% in downbeat market after consortium of company and other CK Group peers makes $9.9 billion offer to take over Australia's APA Group; Hang Seng Index down 1.2%. Analysts at Daiwa say an acquisition could well give company more than 50% of gas transmission-and-distribution market in Australia, making approvals from antitrust regulators a hurdle. But house believes company "would have checked with the regulators" before submitting its conditional non-binding offer to conduct due diligence on APA. "We would expect CKI to sell some of APA's stakes in Goldfields Pipeline, Parmelia Gas Pipeline, Mondarra Gas Storage facility" to obtain regulatory approval. Note, CK Group also controls Australian Gas Networks. Daiwa estimates 11% EPS accretion for CKI in 2019, assuming that deal funding will be structured with 40% cash and 60% debt, and that Power Asset Holdings "will join the acquisition and fund 20% of the investment," while CK Infrastructure and CK Asset each takes 40% stake -- similar to deal structure for Duet acquisition in 2017. House doesn't expect need for CKI to issue equity. Shares of Power Assets, CK Asset and CK Infrastructure, other members of consortium that made APA offer, up 0.4%, down 0.7% and down 1.9%, respectively.
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